AUD/USD, GBP/USD and EUR/USD stage a short-term recovery in a bear trend

GBP/USD spent most of January trending sideways but the beginning of February has seen an injection of strength. We broke above mid-to-late January highs in the 1.5220 – 1.5270 area on Thursday. However we are facing a big barrier in the form of six-month trendline resistance now, as you can see in the chart below.
This is at 1.5355/1.5360 and now it’s Friday, so we must see a break and a weekly close above here tonight to be more confident of continued strength into next week. However at this stage the move is just a recovery in a bear trend and the odds would favour a rejection of this trendline resistance and resumption of the bear trend. Keep a very close eye on the 1.5355/1.5360 area and in particular on whether we close above or below this level tonight.
The EUR/USD is a slightly more positive picture in the short term at least. You can see the 1½-month trendline in the chart below and we managed to hold above here for three days. However, the upward sloping bear flag indicates just a short-term recovery in the longer-term bear trend and we will have to see how these trendlines work over the coming days and weeks. If it is a bear flag then it won’t take too much longer before we see a break to the downside and once below 1.1445 that would add pressure. A break above the 1.1660 area however would be far more positive for this pair.
Lastly I am going to take a look at the AUD/USD , which had quite a wild ride during the week when interest rates in Australia were unexpectedly cut to stimulate growth. Tuesday’s candle shows that long spike down to 0.7623, followed by the remarkable recovery which on the same day beat Monday’s high. This left a very positive candle formation with a long lower shadow. However we have not yet seen follow-through over the past two to three sessions. It is worth looking at the short-term four-hour chart below.
You can see that over the last week of January there is a potential left shoulder to an inverse head and shoulders pattern. The big spike down on the 3rd of February forms the head of this potential pattern. The price action over the 4th and 5th of February has now formed a potential right shoulder. The thick black line represents the neck line to this potential inverse head and shoulders pattern in the 0.7855/0.7865 area. A break above here would be positive in the short term for the pair and could see quite a swift move up to 0.7925/0.7930 and perhaps as far as 0.7995/0.8000 into the middle of February. However, only a break above that neck line confirms the head and shoulders pattern and it’s too risky to jump the gun and buy now in the hope of a break higher. Failure to break above the neck line would mean that the longer-term bear trend remains intact.
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